In
February 2012, we submitted to the ERCB an application
to modify our approved CSS application. This modification
seeks to change the vertical Cyclic Steam Stimulation
(CSS) earlier approved, into a thermal recovery
project with test wells that use a horizontal application
of CSS. It is anticipated that regulatory approval
could be received within several months from date
of filing. Our proposed thermal recovery project
will be located on the Northern half of section
10-92-13W5 and has good road access on most of
Penn West Petroleum Ltd.’s (“Penn West”) hard packed
roads. Section 10-92-13W5 is approximately 1.4
kilometers away from the nearest Penn West hard
packed road. We intend to upgrade our existing
winter road to section 10-92-13W5 to an all-weather
road and acquire the remaining road infrastructure
and build it as an all-weather road up to the proposed
thermal recovery project site. We intend to upgrade
and or build the all-weather road to our proposed
thermal recovery project well site location during
the initial phase of the project development.

Once
we receive approval from the ERCB for our modification
to our CSS application we plan to drill two horizontal
wells along with two vertical observation wells
on the North half of section 10-92-13W5 in order
to conduct a Horizontal Cyclic Steam Stimulation
(”HCSS”)
thermal recovery project. The HCSS process injects
steam into the oil sands deposit through a horizontal
well. Pressure then pushes the steam into the oil
sands while the heat of the steam allows the bitumen
to flow easier. As the steam soaks into the oil
sands deposit, the heated bitumen flows back to
the same well, which has been converted to be a
producer and is pumped to the surface. This process
or cycle is then repeated several times in the
formation.